Legal Aspects of Representative Office

There is no definite answer on whether “Company Law” or “Enterprise Law” applies to Representative Offices of Foreign (Region) Enterprise. There is a special legal regulation governing them and it continues to make changes to perfect it.

On 10 November 2010, it was passed at the 132nd State Council Executive Meeting, the “Permanent Representative Offices of Foreign Enterprises Registration Management regulations” (hereinafter referred to as “Registration Regulations”) which came into effect on 1 March 2011, this new introduction of administrative regulations abolished the one issued in 1983 (hereinafter referred to as “1983 Registration Administration”). The biggest difference between the two regulations is: the new regulations clearly define the Representative Offices that are those engaged in non-profit making business activities offices. It cannot engage in profit-making activities, unless otherwise provided in the international treaties concluded by China.

According to the 1983 Registration Regulations, Representative Offices are those offices engaged in business activities indirectly relating to the business of the Foreign Enterprises. That is, the Representative Offices of Foreign Enterprises engage in profit-making activities indirectly. In addition, with the introduction of the Registration Regulations, matters regarding registration, establishment, changes, cancellation, legal liability and other aspects should have carried out in accordance with the specific provisions.

A) According to the Registration Regulations, the following points should be noted:-

1. Registration of Foreign Enterprises includes: Name of the Representative Offices, name of its respective Chief Representative, business scope, registered office, stationed period, name and registered office of the foreign enterprise.

2. Foreign enterprise should appoint a Chief Representative in writing and the Chief Representative should act within the mandate that the foreign enterprise authorize and act on its behalf

3. Representative Offices cannot engage in profit-making activities, unless other China international treaties concluded or acceded to the Agreement.

B) Regarding establishment, the following points are note-worth : -
1. Address proof and legal business certificate showing that the foreign enterprise surviving for at least 2 years
2. Memorandum and Articles of Association of the foreign enterprise or organization
3. The appointment letters or such kind of documents appointing the Chief Representatives
4. Identification documents and Resume of the Chief Representative
5. Credit certificate issued by the companies which has previous business dealings with the foreign enterprises
6. Proof of the place of the legitimate use by the Representative Office

C) Changes and Cancellation of Registration: Provisions regarding the deadline should be noted.

D) Attention should be drawn to the legal responsibility, Article 35 provides that : without registration or those representative offices that engage in business activities, the registration authority shall order it to stop doing businesses / activities, punishable a some of RMB 50,000 to RMB 200,000 as fine. Representative Offices in violation of the provision of these regulations and engaging in these business activities, the registration authority shall order rectification, confiscate the illegal income, confiscate dedicated to engaging in business activities of tools, equipment, raw materials, products and other belongings, a fine of RMB 50,000 to RMB 500,000. If the circumstances are serious, the registration certificate will be cancelled.